Chapter 10 - § 10.3 • THE DESIGN-BUILD CONTRACT

• Jurisdiction: Colorado

§ 10.3 • THE DESIGN-BUILD CONTRACT

The design-build (D/B) form of project delivery system is being used more frequently in every sector of the construction industry, including design-build contracts between the contractor and the owner, as well as design-build subcontractors for specific items of work on a project.⁷⁰ Under the traditional form of project delivery system, the owner bears the responsibility to provide the project design, with the architects/engineers (A/Es) working directly for the owner as the owner's agents. When the contractor provides a design-build form of project delivery, the contractor takes on design liability for a project, in addition to construction liability, thereby substantially increasing its risk on the project.

§ 10.3.1-Shift of Design-Related Risk to Contractor

Under the design-build form of project delivery, the D/B contractor provides a single source of responsibility to the owner for project design and construction.⁷¹ Regardless of whether design services are provided by an in-house design staff, joint venture partners, or subcontracted A/Es, the D/B entity cannot divorce itself from design responsibility and the related exposure to professional liability.

In fact, a D/B contractor's legal obligation for the design often exceeds that of the A/Es who provide design services to the project. D/B contractors generally become responsible for the accuracy and completeness of project plans, specifications, and cost estimates. Should there be any deficiencies in design performance, the associated contractual, tort, and statutory liability will fall upon the D/B entity. Allegations and claims for negligence related to design preparation, site surveys, material selection, increased construction costs, and construction observation are common. Under the design-build contract, the contractor becomes liable for such design-related claims. See Chapter 26, "Contract Clauses Managing, Allocating, and Transferring Construction Project Risks."

Implied Warranty of Accuracy of Plans and Specifications

In traditional design-build project delivery, A/Es generally do not warrant their design services by guaranteeing perfect results. Instead, the law simply requires an A/E to perform in a manner consistent with generally accepted standards of care and skill for that profession.⁷²

However, an owner is traditionally held to a different standard when providing those same plans to a contractor. Unlike the design professional, the owner's design-defect risk implies a warranty of adequacy and suitability for construction.⁷³ As a result, the owner of a traditional design-bid-build project may be liable to the contractor for design defects, while not necessarily having recourse against the A/E who performed those services in a manner consistent with generally accepted standards of care. For example, a geotechnical engineer may conduct subsurface investigations according to generally accepted standards of care and skill and not uncover specific subsurface or environmental conditions. In traditional project delivery, only the owner would be responsible for the additional costs associated with these changed conditions. However, under the design-build method of project delivery, this additional cost may have to be absorbed by the D/B contractor (unless, of course, the owner hires the geotechnical engineer directly).

In design-build project delivery, design-defect risk may be assumed by the contractor responsible for delivering an "end product." To a degree, this shift in design-defect risk is fundamental to the "single point of responsibility" concept of design-build project delivery. However, this shift should occur in a fair and reasonable fashion. D/B...